The 'messy' way a former Goldman Sachs employee grew a $150 million startup, then turned half his employees into millionaires

Scott Belsky is an early investor in startups such as Uber, Pinterest, and Warby Parker who began his career at Goldman Sachs.

He realized quickly that Goldman wasn't for him, so he spent the next four years saving $18,000. He used the money and some help from those close to him to quit and bootstrap a startup called Behance. Belsky didn't take a paycheck for the next two years.

In the end, the hard work paid off. Adobe purchased Behance for a reported $150 million, and Belsky went out of his way to turn half of his employees into millionaires from the sale.

But he says the sale isn't the interesting part of his story. Instead, it was the stressful "messy middle" years of Behance that defined his career.

Belsky sat down with Business Insider for an episode of our career-focused podcast, "Success! How I Did It," to discuss how he built a $150 million company, how he discovers billion-dollar startups like Uber before anyone else, and how he turned half of his employees into millionaires.

Shontell: We have Scott Belsky, a venture partner at Benchmark. He is also an entrepreneur who left Goldman Sachs to start a company called Behance, which was acquired by Adobe for $150 million. He's a best-selling author.

We'll talk about all of that, but first I want to go back to the Goldman days. You graduated from Cornell and went to Goldman Sachs, which is where a lot of people want to build and end their careers — but not you.

Scott Belsky: In 2001, 2002, I wanted to be in business and was looking for an internship or a full-time job. And people say, "You have to cut your teeth on Wall Street," especially if you were on the East Coast back then. And so I did — I migrated to a very mundane job on the trading floor at Goldman Sachs.

It was the 50th floor of 1 New York Plaza at the time, and it definitely did whip me into professional shape. I learned a lot about how the markets work and certainly improved my finance skills. A year and a half in, I realized this was not where I was going to spend my career.

Shontell: And you stayed for four years?

Belsky: Yes. So when I realized that I said, "OK, finance is not my thing." I had a design background from undergrad, and I was interested in flexing some of those muscles as well as learning about how a company is run. I was fascinated with leadership development and succession planning.

There was a job that opened up in the executive office that was focused on organizational improvement and succession planning, and they needed an analyst-level person to come in and help. I thought that was such a cool opportunity to be a fly on the wall, seeing how the firm was run. So I did that and then I stayed for three years before going to business school and starting my company.

How a Goldman Sachs employee launched a bootstrapped startup with $18,000 — then survived without a paycheck for 2 years

Shontell: So you had a plan in the works and you were squirreling away money with the hopes of someday starting your own thing?

Belsky: Yes. When I was in the second job at Goldman, I was learning so much. I had a group of colleagues I really looked up to who were mostly academics. In the world of leadership development I worked with GE, that sort of thing. And then at night I was kind of working my own ideas.

Things really got real in 2004, or early 2005, when I met another designer by the name of Matias Corea. And he and I started having a bottle of wine at night at 9 p.m. after work and sketching out this idea for what would ultimately become Behance.

Shontell: So what is Behance? Or what was it? Is it still around?

Belsky: It is still around, and it's now a network of over 10 million creatives all around the world showcasing their work and getting jobs and opportunities and that sort of thing. It's probably the largest creative professional network in the world at this point.

And so the idea behind Behance was to put up your work, have your own personal portfolio hosted on your own domain, but also to have all that portfolio content categorized and organized for people to find it and give you jobs.

Shontell: So, when you were starting this company — which sounds extremely different than being an analyst — it was not cool to leave Wall Street for a startup. You were one of the first, and then there was this wave of people moving from Wall Street into tech. Was that scary?

Belsky: It's strange thinking back about how scared I was to leave this comfortable womb of Goldman Sachs, where I had healthcare and all of these little perks. I felt like I was in the mix in New York, being employed. And to explain to people that I was leaving with this idea just didn't make sense to most. So I more often told them I was leaving to go to business school. Which in some ways was a hedge. It was, "If this idea doesn't work out, at least I can probably get a job again, because they'll have seen me go to business school, which is somewhat normal."

Shontell: Do you think the business-school era of your career was necessary?

Belsky: It's a great question. I would say it's like 51-49% I can't regret the relationships I made and certainly some of the things that I learned. Also I would say that business school does not add a lot of credibility in my field of technology and entrepreneurship, and I don't find that it gives me a ton of value.

I also think that it's really helpful to learn the playbooks of the past, but when you're really, really innovating at the edge of an industry, the playbooks of the past also can paralyze you. And so maybe it's a help to understand them, but sometimes being naïve at the top of the funnel of doing something is helpful. You know, it almost makes you think that there's potential beyond what's been done before. And when you know too much about an industry you get scared away from it.

Shontell: And I assume you went to Harvard, just because you're so successful?

Belsky: Yes. Actually, there's this woman named Teresa Amabile who is a professor at Harvard focusing on creativity in business. And so I actually emailed her before I even applied anywhere and tried to ask her about her research, and if I got in would I be able to work with her? And she was like, yeah sure, if you can get in, call me.

And so I only applied to Harvard and with the explicit reason of working with her. My essays were actually about building this company to organize the creative world. And I'm sure they were like, I don't know who this kid is, but he definitely knows who he wants to work with and what he wants to do with it. That probably helped me, because my scores were not very good.

Shontell: So let me get this straight. You were a Harvard guy and a Goldman Sachs guy, and you chose to bootstrap your startup when you started Behance. You probably could have raised money, I would assume, with that background, from a good number of VCs.

It's kind of like being a Google engineer — it seems like the money just sort of rains down on you when you're looking for a seed round. So why did you put that burden on yourself financially? Why bootstrap?

Belsky: I think there were two reasons. One was probably I just wanted to control my own destiny at that point, and I wasn't sure whether ... This might be a lifestyle business. I mean we started ... We always liked to say we were medium-agnostic but mission-centric, so the mission was to organize the creative world, but we would do it through any medium possible, whether it was a book or a conference or a blog or a technology like the Behance network. And so I knew that was really a red flag to VCs, who would say: "Oh, not focused. We're not going to invest in a company that's going to spend the money on producing a conference."

I knew that that just didn't resonate. And so I said to myself, OK, I want to control my own destiny here, and I want to be able to do these things because I think they're important for our brand. And also I want to allow for the ability for this to maybe be a lifestyle business, where we provide for the team and everyone can make a decent living, and we don't have anyone else owning our equity.

Shontell: And so how long was it that you went without a paycheck?

Belsky: I went without a paycheck for about two years.

Shontell: And your family was cool with it? They're fine — it wasn't scary?

Belsky: I had money saved up from Goldman. I had been there for about 4 1/2 years. I had family that was willing to kind of help me on my rent and stuff like that, so I certainly wasn't on my own completely, but I definitely had a small bank-account balance. And I was definitely always saying to myself, "OK, when am I going to have to get a 'real' job?"

It got to the point where I just wanted the business to succeed so much that I remember actually not even reimbursing myself for taxi receipts because I'd be like, OK, I just want these numbers to look as great as possible. And the least that I can take out of the business, helps us kind of show that the business is working. And I also just wanted to make sure that the team was as comfortable as they could be in this period of time where there was so much uncertainty, and we weren't really making it yet.

Shontell: And so at two years, is that when you, I assume, started making money? Because to me, sounds great to connect the world's creative people, but it's not obvious how you're going to make money with that. So how did you kind of get the ball rolling there?

Belsky: Our first product ever was six months after the company was sort of officially founded in late 2005, and this was a paper product line. And so they were basically a design line of paper products that I actually used to design for myself when I was at Goldman. And it had a really defined area where you capture actionable items, and a sketch area, and the idea was to push designers towards capturing actionable stuff that came out of meetings and brainstorms.

And so we put this line out there and Matias helped do the final design and make it look good. We got it printed by a printer in Massachusetts, and we got featured on some blogs like Cool Hunting and a few others right away. And immediately there was this loyal following of people who were purchasing these products. And so that was when we first had revenue, and then as that scaled up, and we had a retail distribution channel as well, I said OK, I should probably take a little bit of salary to pay my bills. And then that led to conference, led to us being signed with Federated Media alongside Business Insider and other early publications to get ad deals for the pageviews we were amounting. And this is back in the day when there were good CPMs (cost per thousand ad views) for things like that.

Shontell: Definitely. Yeah, so for people who don't remember who Federated Media was, it was basically the way your company, our company, TechCrunch, Bleacher Report, all of the great sites that were founded I feel like in 2007, 2008, or even a little bit before were funded by this company, Federate Media, who would sell ad deals for you when you didn't have a sales team yourself.

Belsky: Exactly, which we didn't. And for a medium-agnostic platform like us, we didn't have an ads sale team of course, so that was a perfect partner at the time. And that's we bootstrapped the business, and it was really hand-to-mouth type of activity. We were always maybe a few months away from not making payroll. It made us really feel the granularity of our business, and it was extraordinarily tough.

Shontell: Did you have some sort of benchmark in your mind where you're like, OK, if I'm not at this point by this amount of time, I'm just pulling the plug and going back to corporate America?

Belsky: That's a really good question. No. I didn't. And also, and this is crazy, but until we raised venture funding five years into the business, I had never had a conversation with my team about an exit of any sort. Even Matias and I were the first two people there, we never even over coffee said, "Well, should we ever exit?" It just never was in our lexicon until we had these meetings with investors. We just were loving what we were doing. We felt like it was important. We felt like design was becoming a competitive advantage in the business world. And we said OK, if we're the number one platform for designers and design is becoming the competitive advantage, we're going to be fine.

Shontell: And so how did bootstrapping for all those years, and then you later raised money from Union Square Ventures and a few others, how did that help your terms with venture capitalists?

Belsky: Well it helped extremely — I don't advise people to do this, because there were many near-death experiences. I do believe that we in some ways squeezed blood from stone at times and maybe survived at times we shouldn't have. So I don't think it's wise, per se. However, it's one of those things where if it doesn't kill you, it makes you stronger. And so five years in, we were a breakeven business. We had a team of over 15 people probably. We had a brand that was established. We had a network that was rapidly growing. We went to raise money, and we could do it on our own terms. And we only sold a very small percentage of the company, because we had earned that right. But I don't know if the odds were ever, you know, good enough to have made that decision wisely.

Shontell: So, what are some of these near-death experiences?

Belsky: Ad deals falling through and realizing, oh, our three months of runway just went down to 1 1/2. Or people not paying their bills. Not being able to hire certain people that you needed because you didn't have the cash to do it. The downturn of 2008, when things just kind of went south. And I was doing some of these little speaking things for companies on helping them have better-organized design teams, and suddenly the budgets go away for something like that. Realizing we built our network wrong, basically had to recode the whole thing because it wasn't scalable. Or that we signed on to the wrong hosting partner and realized, oh shit, they're not going to be able to scale us either.

It's all of those things, that each one of it — it's sort of like death by a thousand paper cuts in some way, but also at times we just realized oh my goodness, this may not work. And we just persisted. I think it was the team, and the culture, and the fact that we really liked working together. Also, we were in New York, where people weren't always buzzing about like, another company just got funded, or, another job at Facebook they could get. There was a degree of loyalty that I think was essential in New York uniquely, to keep our team together long enough to survive.

Shontell: One benefit that you get when you have a team of investors, and I guess you had a board probably, but when you get investors there's strategic investors. They can help make connections for you; they can help advocate your brand; they can be someone to vent to all the time. How did you get through those highs and lows when you're bootstrapping and you don't necessarily have access to all that?

Belsky: Well I think as the leader of a company it's always lonely. And you look for mentors and other people that you can go to for specific things, and I think I did that. I didn't have anyone that I could just tell everything to and who could just be there shoulder to shoulder with me, until we actually raised money and I had the USV and other folks in the circle. I think I was just really selective about it, and it was really lonely. It was anxiety-filled, and I also believe that as an entrepreneur one of the greatest costs is the constant processing of uncertainty that your brain is managing. It's almost like dedicating 20% of your RAM to one task that is always running. And you're never as present with your family, or your friends, and you're always just processing. And I think that's really, really hard, but it's part of the cognitive costs you pay.

The 'messy middle' of a startup no one ever talks about

Shontell: And so part of the reason why I'm touching on this is that you've kind of coined a term for all this called the messy middle.

Belsky: Yeah.

Shontell: Which is something that the press doesn't really get to write about or doesn't write about very much. It's usually the launch, or the ending of a startup when you sell, or something like that, or going under. But there's all these things that happen in the middle of a startup that are really hard for entrepreneurs to grapple with.

Belsky: I'm glad you ask about it — it's my obsession lately and over the years. Which is that the press and media, and everyone else, loves covering the romanticism of the start, when people quit their jobs and start something and launch a new idea or raise some funding. And then we also love covering and talking about the finish, whether it's an acquisition or an IPO, or a bankruptcy. Or a legal investigation. These are pithy headlines that people love to write about. What doesn't get covered really as often is just everything that happens, as like you said, in the messy middle. And all of that is really, in my mind, two things. It's endurance. It's enduring the amenity and the uncertainty and the lack of rewards, or financial rewards, or customers — or anyone telling you you're doing a good job or anyone even knowing what you're doing. And then it's enduring that, and hacking yourself and your team to be able to withstand that.

And then it's also optimization. It's constantly optimizing anything that actually is working, like the way your team is working, the way you're hiring, the way you are working and being productive. Optimizing your product or service, constantly making it better. When anyone says they liked it for some reason you accentuate that. All of those things make up the optimization side of the messy middle. And I just think it's one of those parts of the journey — not only entrepreneurs but artists and anyone else that people seldom talk about.

Shontell: So the press person in me, titling this podcast would probably be something like, "Man puts $18,000 into startup." That was your initial investment, wasn't it?

Belsky: Yeah.

Shontell: And turns it into, dun dun dun, the end, the $150-million-plus sales to Adobe.

Belsky: Which tells you absolutely nothing, right? The writer in me would also look for the same, pithy, whatever. But in truth, that was so sort of ancillary to all of the real calculus. In the real strokes of fate and luck, and individuals that joined our team, that made all the difference. And there are probably at least a dozen or so people that without any one of them, the stars would not have aligned and Behance would have never succeeded.

Shontell: Well we do have to talk about the ending a little bit.

Belsky: Sure.

How a giant startup acquisition actually happens

Business Insider Video

Shontell: So, you did end up getting this great exit to Adobe. How did that come about? You guys had been partners for a while. How long had you been talking to Adobe? How does a deal like that come to be?

Belsky: Yeah, well, there's always a relationship. And my attitude was we were never looking to sell the company. We were never really thinking about--

Shontell: People always say that, but if you're a first-time founder, it's hard to not imagine what it would be like.

Belsky: But also is in vogue to never think about it too.

Shontell: Right.

Belsky: I mean you just, you had this idea of, oh, well, you know Facebook never thought about that, and like, I'm just going to stay focused on the long term.

Shontell: I'm sure he thought about that when Yahoo came around.

Belsky: Probably.

Shontell: I think he was pretty close.

Belsky: Well when you get an offer you do think about it. But before you get an offer, you just tell yourself you're in it for the long haul. You have a vision of what this is going to look like years from now, and anything that gets in the way of that, including talking to Corp Dev people and stuff, is sort of noise. And so I really didn't like these sorts of conversations, but sometimes there were partners where I said OK, they could do an ad buy. They could do a partnership where we could get people who download their products to automatically sign up for Behance portfolio. There are a lot of things like that.

When Adobe decided to make the switch from software to service, and really literally overnight that flipped a switch, and they became one of the largest SAS businesses on Wall Street. Over a billion dollars and annual ARR in annual occurring revenue, they realized that they needed a network at the center of their offering. And we were the really best alternative out there, aside from building it. And so it became very clear to me that we were very strategic, that we would not be a tech acquisition, or something that was broken up. We would be like a core, product-strategy acquisition.

I loved the team that I was working with there when I was starting to really get to know them. And then from the financial perspective, the question was — it was really a simple math problem. It was basically OK, we've taken very little dilution. We've only done one round of funding and it was small. The team owns a big percentage of the company, and if we don't do this now, we're going to have to probably do a B and C. We're going to take this much more dilution — we're going to take this much more market risk for a team that's already been together for five-plus years.

There's a lot of risk there, and if you actually do the math and start to think about it, the outcome of this acquisition versus waiting for five more years and potentially getting bought for $500 or $1 billion. It's actually the same. It's literally the same. And the question is, well, if that's a really good outcome from an investor perspective, and we think it's a really great acquirer, and we're going to be really centralized and empowered at this company, maybe this is our parent. Maybe this is meant to be.

Shontell: You know I think there's a good point in that. If you look at the exits of Huffington Post versus TechCrunch, Huffington Post sells for $300 plus million; TechCrunch $20 million to $30 million. But both Mike Arrington, the founder of TechCrunch, and Arianna Huffington, the cofounder of Huffington Post, made about the same. They both walked away with about $10 million or so, I think were the reports.

Belsky: I wrote an article recently about the sort of unicorn space that — it was also shared with Business Insider, and you guys were generous enough to republish it. And it was really about this question of the economics of these financings and trying to get employees to understand the ramifications of these things. Obviously the billion-dollar acquisition sounds amazing, compared to a $100 million acquisition or $20 million acquisition. But when you actually, as you're saying, do the math, you start to realize it's all about not only the dilution but also the terms of the financings that these companies have done and what the liquidation preferences are. And there's a lot of other math that happens where — I remember when Tumblr got acquired for $1 billion. There were people who didn't get much of anything that worked there, right? And you see, I hear those stories all the time. So it should really be about the mechanics of the company, and the decisions that were made in the financings and less so that total number that the press likes to cover.

The one stock-option question everyone should ask before accepting a job at a startup

World Domination Summit 2012/Flickr

Shontell: So, talk a little bit about what employees can do to realize what kind of a situation they're in when they join a startup. What questions should they be asking? What do they need to know about stock options? How do you know if — you know it sounds great when your company raises $50 million to $100-plus million, but what does that actually do to you?

Belsky: Sure. The two things that I think are important are one, is to realize that when you're joining a startup the likely outcome is nothing. And even if the company does OK and has an exit, if you're a later-stage employee, you should really be making sure that you get an experiential education that is extremely rewarding, first and foremost. But if you are sacrificing salary, you have a right to upside. And you also have a right to understand what your upside might be.

And so rather than suggest to every engineer or designer or anyone else out there to get copies of term sheets and look — I mean it's really hard to do all that stuff and to ask a million questions. You're probably not going to get far in the interview process if those are your questions. But what you can do, when it's in the final stage of accepting an offer, is you can ask a simple question. Based on the equity you're offering me, what would my stake be worth if the company were acquired for $200 million, for $500 million, for $1 billion? Just ask that question.

Your answer might be that if it's acquired for $200 million, your stake is worth zero. If it's acquired for $500 million, your stake is worth zero. And if it's acquired for $1 billion, your stake is worth $100,000. Or whatever. But at least that answer can give you some sense of really what's going on. And I think that's the company's obligation to at least give you some directional guidance on what the likely value of your equity would be in those circumstances, and those are the questions people should ask.

Shontell: And any negotiating tips if you do hear that what you're being offered is zero?

Belsky: Well I think that just having that knowledge allows you to say something like, "Well, if the company were to be acquired for $1 billion and my equity is worth zero, maybe my salary should be a little higher," right? So it's that kind of calculus. Recently an entrepreneur called me with an acquisition offer from one of these unicorn companies. And he said it was like an $85 million acquisition offer for a company that had raised basically seed funding. And he was really psyched about it.

And he had not even asked these questions yet. And when he did, because I said to him, if you got your company acquired right now for $85 million in equity from this unicorn company, and you found out that they ended up exiting at the valuation they raised their last financing at, ask them like how much you would end up getting. And he ended up learning that it was basically nothing. And he didn't go through with it. So, I think he could've negotiated a much larger acquisition price I think based on that. But he chose not to just proceed at all. I think these are the types of questions and they open up obviously the types of negotiating points you could pursue.

Shontell: Are companies obligated to tell you?

Belsky: I don't think they're obligated to. But then as a prospective employee, you can decide whether you want to work for them or not. And that's just part of the calculus.

How to sell your startup for $150 million and turn half your employees into millionaires

Shontell: So one thing that you did when you were selling the company is you actually went out of your way to make sure that a lot of your employees were in good shape financially. Not something that you legally had to do — you actually looked at how many options they had been granted and how much they would make from the sale. I think you had a spreadsheet, right? Where you said like, OK, this is how much they have, and here's how much I think they deserve. Talk me through that, because that's very admirable. You don't hear a lot of people doing things like that.

Belsky: Well I'll tell you what, I first of all, selfishly, that was one of the most important things I ever did. Because I have a team of people that I got to continue working with for another three years at Adobe, and we were all rewarded again for the work that we did because we stuck together. It was like a long-term greedy decision I would say, because when everyone feels like they're taken care of, they're more loyal, and they stay engaged and focused on the right things. And you can have what I like to call second coming at Adobe, which is, just you know, doing something all over again and making an impact and being rewarded for it.

I also think that I've already realized that those sorts of stories get out. I want to admit that there is a selfish side to that, right?

Shontell: Yes, but if you had your $100 million exit or whatever you could ride off into a sunset and never worry about if you piss people off or not.

Belsky: I think that that happens too often, and I think that there's something about the values of an entrepreneur should be. That you should be able to look at everyone that's worked for you, look at them in the eye, and know that they feel like you took care of them. And I think it's like the stewardship role of an entrepreneur is to take care of your team. And I think that goes through in difficult times as well as in great times.

My math is very simple. I looked through the whole roster of everyone on our team--

Shontell: And how many people were there?

Belsky: So at the time of acquisition maybe like, 27, 32, I forget. That's something in the high 20s or low 30s. And what I did as an exercise with Will Allen, our COO, at the time, is I said OK, what would be the re-up grants that we're going to give all these people over the next two to three years? And let's assume that all of them had vested over those two or three years, and we had sold the company for $150 million, $200 million, what would their stake be worth?

And the let's make sure that's what they get out of this acquisition. So I can go to all of them and say this is what your equity would've been that you were going to get over the next couple of years. This is what it would all be worth once it's all vested. I want to make sure you have that now, and so for the next three years we can make some of the greatest work of our lives and we can all feel like this is resolved and exceeded our expectations. And we did that for every single member of the team.

Shontell: So you basically accelerated the vesting process?

Belsky: So we accelerated their unvested equity, as well as allocated additional value across the board to people, based on what we felt like their future grant would have been. For example, we had some incredible engineers who had joined us just six or eight months ago but really made the difference between this deal maybe happening or not. But none of their equity had been vested, and they'd only gotten one grant so far. And we wanted them to be a part of the team for years. And we figured if we could just synthetically make them realize that they were kind of getting what they would've gotten as sort of locked in, with some retention of course, some retention incentive that we could do that.

And so it kept the team together at the expense of some of the return to the investors and myself. And one thing I have to say about Union Square Ventures is I had one call with them, where I told them this and it was basically millions of dollars off the top in return for them — they were totally OK with it. And supportive.

Shontell: So you have to get by from your investors and the company that's buying you to do this. And I guess for some entrepreneurs, it's an acquire situation where they might not have the most negotiating power during a sale, but--

Belsky: In our case we did, but Adobe loved this idea, because this is to their benefit. I mean if you think about it, they were having less money go in my pocket and investor's pockets, and they were having more money going into the team with some retention incentive. So to them it was like, yeah sure, this is great. It was really the sell to the investors that I was worried about, but they were supportive.

Shontell: So it ended up being that about half of those people, like a dozen or so, became millionaires in the sale. Which is pretty amazing. So half of your team.

Belsky: Right. A million more. And it was great. I mean it's really rewarding. And I will never forget the conversations I had with each person, where I knew about each of their situations: I knew about their college loans. I knew a lot about these things because as a bootstrap business, you get very intimate with people's financial situations because you're working with them to figure out what will make it work. And to deliver that news and see their faces, and share it also with the whole team, is probably one of the most emotional moments of my life.

How Scott Belsky discovered and invested in Uber, Pinterest, and Warby Parker before everyone else

Ben Silbermann cofounded Pinterest. Scott Belsky is one of Pinterest's early investors.Getty images

Shontell: I want to switch gears, put your other hat on a little bit, and talk about your investing that you do. Since you've left Adobe, you were an executive there for a couple of years after the sale. You joined Benchmark as a partner, and you're a venture partner with them. But you've always been a seed investor for as long as I've known you, anyhow. And a couple notable things that you've invested in very, very early on are Uber, Pinterest, Warby Parker, Periscope, which sold to Twitter before it really even launched. So how do you find these things? And what are you looking for in entrepreneurs to know if they're going to win?

Belsky: Well, I think — you know, I like to say that a labor of love always pays off. And when I meet entrepreneurs that excite me, solving problems that are interesting to me, and they allow me to roll up my sleeves and take in a product a little bit, I geek out over it. And I get involved, and if I can, I put in money. And that's sort of in my seed-investor playbook, right? To be honest. And of course when one of those companies does well, then you get more, as they call it in the industry, deal flow. Because people who know you were involved with say, Uber, then say OK, well do you want to see this? Do you want to see that?

So I've enjoyed that part of life and have dedicated some percentage of my energy towards investing and working with these really sage teams. I think I went into the full-time general-partner role at first at Benchmark. My assumption was that my love of that would be a proxy for me loving the traditional investor job at a kind of classic venture-capital firm, and I just realized that they're actually very different. And while there's some of that that you would do, being at a VC firm, I just like the flexibility and the creativity. And the problems that are faced at an earlier seed stage versus like the late stage, postmomentum, series A or series B, that a firm like Benchmark traditionally does. And so that's why I am spending more of my time on the earlier-stage, venture-partner-type deals now.

And what do you look for? You look for a team that is really receptive to feedback, really not just passionate but also empathetic with the customer. That's really one of the biggest mistakes I see in entrepreneurship, is a team that's super passionate about a solution, but they really don't have empathy with the people that they're targeting.

Shontell: So what was the first meeting you had with Pinterest? Ben Silbermann, the CEO there, finds you. He's in New York; you're in New York. What happens?

Belsky: Well he was building a product that was grid-centric, from a design perspective, and Behance was always also a grid of projects. He also realized that the most valuable pins were well designed. They were beautiful pieces of art and design and whatever and--

Shontell: But this is back in what year? People didn't even know what pins were.

Belsky: Yeah, this is so when, 2010? Pinterest was already live and already getting some traction in unexpected places like middle America, not popular at all in Silicon Valley. But he had always a design sensibility, and he was going around New York meeting people for product advice. And we were introduced by — actually one of our interns who was like, oh, I know a guy who knows a guy who's here, he's building this. And I looked at it, and was like, "Oh, this makes a lot of sense." And so we just spent a couple hours brainstorming around on mechanics of pinning something and following somebody. And maybe automatically following their boards versus just following certain boards, and the problems, and that sort of thing. And he was actually trying to raise a seed round and was struggling to do so. I think that was why he was in New York in the first place.

Shontell: I remember a story that he told to I think Y Combinator people where — he said I walked into a VC meeting and everybody was in there, and I was so excited because I thought they were here to hear my idea. And then I realized there was a, like, plate of cookies on the table, and as soon as all the cookies were gone, all the people left.

Belsky: They could leave. Right.

Shontell: So yeah, it was not a layup bet that you made then.

Belsky: First of all, Pinterest has always been an underdog and still is today somehow. But he is extraordinarily anchored with what his product does for its users. He's also one of those people that's always thinking about process as well as product. And you ask him what his goals are, sometimes they're actually even more processed goals for how his team can better function and perform than they are what the product can become. He's extremely mission-driven, and those are the things that excited me during that time with him. And so even though I had no business seed investing in 2010, believe me, I was barely making a salary at the time, but I told them I'd put in some money. And I also I wanted to just stay involved with the product conversation. It was one of those things where I just wanted to have another conversation like this and realize if I wasn't an investor, it would be harder to do so.

The first version of Uber seemed like a terrible idea — here's why Scott invested anyway

Travis Kalanick and Garrett Camp founded Uber. Camp showed Belsky a sketch of an early prototype, and he invested.m

A similar story with Garrett Camp. Which also happened in 2010, where he and I were doing deals together because he was the CEO of StumbleUpon, which he had recently repurchased from eBay. And StumbleUpon was one of the biggest driver of traffic to Behance. And some of the best-performing stumbles were photography projects on Behance. And so we were doing some type of ad credit deals together and at the end of the meeting he actually whips out one of our notebooks and shows me this diagram that he had made of the Uber prototype. Which wasn't Uber at the time — he was going to call it Uber Cab, and it was basically a livery service. And he was asking me if I wanted to help on some product and brand stuff, and just be like one of the New York people to help them out. And my first blush response was, What're you doing? You just bought back your company, and you're now CEO and trying to grow it, and I'm an entrepreneur as well. Like why are you building a livery service?

Shontell: Yeah, and back in those days I think it was Black Cars for the 1%. So does that sound like a good idea to an investor? When I heard it I was like ugh, what is this company?

Belsky: I just remember back to my Goldman Sachs days — I remember the slips that I used to always have to give the driver, who would then send back to firm, that would come to accounting, and they'd go to my assistant, and then they go back to me for every Black Car I took. And so I figured OK, maybe you can streamline that process, but good luck getting a firm like Goldman Sachs to work with you on this little mobile app. But again, it was the product problems that they were trying to solve, the back and forth that engaged me. And I just started to feel some sense of connection to the prototype and this concept. And then your mind starts to run, it's like well, what if all transportation was done this way? What would that mean for other things like delivery? It's always exciting when you open up a product problem and then it becomes this Pandora's box of opportunity and questions. And that's one of the things I look for when I meet an entrepreneur.

Advice for aspiring entrepreneurs, and tips on how to land an investment

Shontell: So now that you've helped a lot of companies with early-stage deals and you've been a seed investor yourself, what advice do you have for people who are looking to raise their first round, trying to navigate the whole venture-capital scene, figuring out how to get endorsed, how to negotiate terms?

Belsky: Well I think that the meeting with individual investor angel-types who really you can tell a story to that they can resonate with, you can get them excited about some problem that you're solving, when you do that, those people have great connections to other firms. I have a lot of different firms in the seed and later stages that I collaborate with, but it's based on what the company is doing, what the story is, and who the people are. And then I say in my head OK, who would be the perfect person to extend this conversation and bring it to another level? And presumably invest.

And so I do find one role that I play as early-seed-angel type is to help people find their match from a larger raised perspective. So I do think you should target angels, and I stay away from angel groups, because I find that it's more about the money and less about the story and one to one mentorship and resonance in terms of chemistry. I think that individuals, in my biased opinion, are the way to go. I also think that having a really good splash page that just emphasizes what your go to market is and the marketing copy. All that stuff matters not only for potential customers but for investors who get a pitch and then just go to the website URL. It's amazing how many times you'll get a deck or a one-pager, but then you'll go to the URL and there's like nothing there, or even if the company's launched, there's just not really established and updated yet. And it's like well, that should always be a perfect representation of your story, because your go to market matters. That's what people are investing in you in the first place.

Shontell: So know you've got also this great view of the landscape of what's happening in Silicon Valley and the tech world in general. What sort of trends are you seeing? Are you seeing entrepreneurs all starting to tackle one thing? Another thing that's happening in the valley is we had all this investment flowing through, and you had all these companies become unicorn billion-plus-valuation companies. And that seems to have slowed, so how do you look at the trends of what people are building, and how do you look at what's happening in the venture-capital landscape?

Belsky: I'm seeing a lot more of companies building things off of the address book rather than off of Facebook or other established social graphs.

Shontell: So through your iPhone, address book, contact list, what are people kind of working on in that space?

Belsky: I think anything can be built — that is ultimately the source of truth of your network, right? Is who you have a connection to via email or phone. And if the quality of the connection matters more than the number of connections, which I think is another trend by the way, that real connection over mass connection. Facebook is really just about the number; LinkedIn, or whatever. But when it comes to commerce and collaboration and working together, whatever, your network is basically already in your phone. And so I think more products are being built off of that, and so I think there's options there whether it's marketplaces or different things like that.

I also think that we're seeing — the whole live-video phenomenon is exciting to me, but the potential of it is always killed by notifications that just drive us crazy. And so I actually think one of the other sort of auras or levels of innovation is around notifications themselves. How can we make them smart and intelligent? What if you were only notified about something when artificial intelligence knew that you cared about it? And so whenever you're at work, it just didn't notify you about stuff. But whenever you were moving in a car and they knew you were idle and just like hanging out, suddenly you got notifications that your friends were live about something. That should be happening, and it's not yet. And I think insights like that around media and the core operating system that we use will unlock things like live video and other sorts of new modern social networks.

It's a great time to start a company, but expect a 'reckoning' in Silicon Valley

Shontell: And what about what's happening broadly in the tech world right now? You have companies that are raising tons of money, they're waiting a really long time to go public — there's just a lot happening. How do you look at that? Do you think that some of these unicorn companies are going to die? Like what's the danger of over raising, and what are the struggles there?

Belsky: I think that we're going to see a lot of them die. They're going to happen at moments where they're not able to raise another round, because of the climate or because they've just raised too much at this point, or they've exhausted any investors that would be willing to. And then they're going to realize that their unit economics need to come into check, and so they're going to stop spending so much money to acquire new customers, which means that their new-customer numbers are going to go down, which means that their valuation is going to go down.

Which mean that even if they're good companies, they're going to get acquired or go public at a much lower valuation than they last raised. Which means a lot of employees will not get the return they were hoping, which means that they will leave.

You can kind of play that out, and you can see that there will be a reckoning, where there will be a lot of M&A activity that a lot of investors and employees will not benefit from, and some companies will probably just go under. And it's just kind of inevitable — I actually don't see how that could not happen.

Shontell: So is now then a good time or a terrible time to start a company?

Belsky: I think it's a great time to start a company.

Because again, it's easier than ever to start something. It is getting increasingly harder to scale, but if you start something that really needs to exist, you will find your audience for it. There are so many new modern ways of raising money like AngelList and crowdfunding. You know, there was this new upstart publication called The Hustle that just raised $300,000 of seed funding in one day from their users, from their readers. You're going to see more things like that happen, and that's exciting. And I think that a lot of them will not work, and some of them will, but the point is that it's great time to take that idea that you have and see if it has legs.